Locals in danger of losing out on lucrative cannabis industry

TWENTY Basotho-owned companies are in danger of losing their stakes in the country’s fledgling multi-million-dollar medical marijuana industry if they fail to meet a 31 January 2019 deadline to pay M540 000 each for their operators’ licences.

This was said by the Minister of Health, Nkaku Kabi, this week in an interview with the Lesotho Times.

Mr Kabi also revealed that some of the licence holders were now demanding as much as M20 million from international investors who want to partner with them in the lucrative medical marijuana industry.

In 2017, Lesotho became the first African country to legalise the growing of medical marijuana (cannabis) amid high expectations that the country would immensely benefit from the world-wide industry which is projected by forbes.com to grow from US$7, 7 billion in 2017 to $31, 4 billion in 2021.

According to the Grand View Research Inc, the global medical marijuana market is expected to reach a value of US$ 55, 8 billion by 2025.

As the first African country to legalise the growing of medical marijuana, it appeared that Lesotho was on course to reap the rewards especially after the government issued licences to some companies to grow the product for export.

However, the country still has a long way to ensure the viability of the industry with Minister Kabi saying that of the 33 people who acquired licences to grow medical marijuana, only 13 had so far paid the M540 000 for their operators’ licences.

Some of the licences were issued during the tenure of the previous seven parties’ coalition government headed by Democratic Congress leader Pakalitha Mosisili but before proper regulations were enacted to regulate the industry.

Titled the ‘Drugs of Abuse (Cannabis) Regulations, 2018 Act’, the regulations subsequently issued by Mr Kabi in May this year pegged the main operating licence – which allows the licensee to engage in several activities ranging from cultivation to export – at M540 000 with its renewal fees costing M350 000.

“When the regulations were implemented in May we made it clear that everyone would pay M540 000 (for the main operating licence) or the M150 000 fee (for those who only intend to grow medical marijuana),” Mr Kabi said this week.

“The regulations applied to everyone including those who got the licences free of charge before May 2018. Out of these 33 licenses, only 13 people managed to raise M540 000. We wrote to the other 20 informing them that by 1 November 2018 they should have paid the M540 000 or return the licences.”

Mr Kabi said they had to hold back from suing those who either failed to pay up or return the licences at the expiry of the 1 November deadline but the association of the licensees (Phekoane Industry Association) begged the ministry for more time to get its members find the money to pay up.

“They refused to release the licenses after the 1 November deadline. We wanted to sue them but their association pleaded with us to give them more time to raise the money.

“They were not able to raise the M540 000 and are still not able to find investors. Most of them have come to ask us to help them find investors,” Mr Kabi said.

He said that some international investors were baulking at demands by some of the licenced locals who were demanding hefty amounts of up to M20 million for partnerships and shares.

“We blocked the issuing of licences to international investors to give Basotho the first priority to invest in this industry. Now they demand M20 million for their pockets as well as 10 to 20 percent of shares to partner with international investors. The investors say the demands are ridiculous. They say that it does not make sense that they have to pay so much money when entering into what should be long-term partnerships. They (locals) are not able to reach agreements with the international investors,” Mr Kabi said.

On his part, the Phekoane Industry Association representative, Retšepile Elias, said the association was aware of the Ministry of Health’s concerns but they were not in a position to comment as they were in talks with the ministry.

“We are aware of the ministry’s concerns. We are in discussions with the ministry about those issues,” Mr Elias said.

Mr Kabi said the delays in addressing the licence issues could cost the country if other countries decide to venture into the production of medical marijuana.

“We have to grab this opportunity lest other neighbouring countries follow suit. We are the first country in Africa to legalise the growing of medical cannabis. We have realised that Zambia is contemplating on venturing into the (medical cannabis) industry and so is Zimbabwe. It is clear that South Africa and other countries will follow suit and if we don’t hit the ground running, we might lose out to them,” Mr Kabi said.

Zimbabwe has also moved to establish a medical marijuana industry with the gazetting of the regulations to govern the production and export of medical marijuana being passed in April this year.

It costs US$50 000 (M700 000) for a five-year licence to grow medical marijuana at one site in Zimbabwe. Those intending to grow the crop at different sites will have to fork out US$50 000 for each site of production.

And as pointed out by Mr Kabi, Lesotho could find itself playing second fiddle to fellow African countries if the delays in regularizing the medical marijuana industry persist.

For instance, Lesotho could soon find itself playing second fiddle to Zimbabwe which already boasts of good infrastructure for commercial agriculture inspite of its other current economic difficulties. Zimbabwe has been a world leader in the production of some commercial crops including tobacco.

Lesotho still stands a chance of claiming a significant share of the lucrative medical marijuana market if those granted licenses are able to operationalize them sooner. It seems only one company – Medigrow – has been able to mobilize investment to launch visible operations thus far.

Medi-Kingdom, another company licenced at the same time as Medigrow, officially launched this week (see separate story below).

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